Carb Game

As the low-carb craze sweeps the nation, it's been blamed for slumping Krispy Kreme sales and New World Pasta's bankruptcy. What's a high-carb food seller to do? Stress moderation, says Nancy Koehn, professor of business administration at Harvard Business School: "People are nervous about whether [low-carb diets] make sense."

Graeter's Ice Cream, a Cincinnati chain with annual sales of $13 million, stresses its product's purity-carbs and all. Posting the message "We've got carbs" outside stores, sales are strong, says Richard Graeter, 40, co-owner and executive vice president.

Greg Pyne, 41, is compromising at The Brooklyn Cafe in Atlanta, which offers a pasta-heavy menu. In business for 13 years, Pyne noticed sales, generally $1.5 million annually, dropping off in January. So Pyne printed menus with the note "ask your server to explain how these products can be made low carb."

Even as restaurants and food retailers adjust, there are signs that a backlash is brewing. The American Bakers Association and the North American Millers' Association are launching a $4 million to $5 million per year PR campaign with the tag line: "Bread. It's essential." Even health-food wholesalers appear to be distancing themselves from the hype. For example, Morningstar Farms is running a commercial questioning whether low-carb diets are going too far.

Brad Saltzman, who made headlines in early 2004 with his Beverly Hills, California, low-carb grocery stores, Pure Foods, has scaled back expansion plans and estimates 2004 sales of $1.7 million. Saltzman, 36, noticed a 25 percent decline in February sales as low-carb foods hit the mainstream. "Customers began shopping at major supermarkets," he says. To boost sales, his store changed its focus to gourmet health foods. Saltzman expects most future growth to come from renting out low-carb vending machines, where he doesn't face such stiff competition.